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Two questions.

Is the employer responsible for reviewing medical expenses?

Are employer-made HSA contributions deductible health care expenses?

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Is the employer responsible for reviewing medical expenses?

No, the employer is not responsible for reviewing medical expenses. It is the job of the individual account holder to determine if their account funds are being properly used. The individual would also be responsible for providing supporting evidence if faced with an IRS audit.

Are employer-made HSA contributions deductible health care expenses?

The tax treatment depends on how the business is incorporated. For sole proprietors, partnerships, and S-corporations, contributions to a partner’s HSA will be treated as a distribution to the partner and included in the partner’s income and may be deductible by the partner but not by the business - IRS Notice 2005-8

For larger corporations, employer contributions are treated as employer provided coverage for medical expenses under an accident or health plan.

  • Regarding reviewing medical expenses: some systems provide a debit card which will not work for nonprescription purchases at the grocery or drug store. – mhoran_psprep Jul 6 '12 at 17:12

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